P&G's Logistics Revolution: Co-creating Value

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Case Code : MM0030
Case Length : 7 Pages
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“P&G has one of the most progressive procurement organizations on the planet. They consistently work to
proactively address real and challenging issues that keep their organisation on the leading edge of business
practices.”1

“We're trying to make the supply chain into a growth engine for the company. A lot of the time, supply chain
management is reactive, or passive, cost control. But we think there's also an opportunity for us also to have
the supply chain create top-line growth as well as bottom-line performance.”2

– Financial Times

P&G's Logistics Revolution: Co-creating Value

Confronting the challenges of rising supplier costs, growing retailer prowess, intensifying competition, fickle consumer
tastes and preferences in the consumer packaged goods industry, P&G gained a distinctive competitive edge through
a strengthened focus on supply network efficiencies. By making consumer the centre of all its core operations, P&G
initiated Customer Driven Supply Network (CDSN) that starts from customer choice at the store shelf and works
backwards towards product manufacture; a paradigm shift from forecast-based supply chain to the one based on realtime
demand. P&G's relationship with Wal-Mart exemplifies the success of CDSN but given the complexities of P&G's
size and scale, analysts remain sceptical about the success of P&G–Wal-Mart's pilot study with other retailers.Analysts
are also dubious of the scope for success in exporting the model to developing markets wherein the industry dynamics
are extremely contradictory.

Consumer Packaged Goods Industry – The Changing Dynamics

During the early 20th century, consumer packaged goods evolved to be a highly competitive industry with a large
number of players vying for a greater market share . Manufacturers, with their market prowess, focused
extensively on reinforcing their strong brands and improving productivity. They established their dominance either by
restructuring their brand portfolios throughmergers and acquisitions or focusing on core brands. Though consolidation
gave manufacturers significant global presence, focus on core brands made it difficult for retailers to avail price cuts.
They even limited the quantity of high-demand products supplied/allotted to the retail stores, insisted on selling products
in all sizes and packages and forced retailers to involve in promotional activities. For instance, P&G brought its
extensive consumer research to retailers and insisted on increased shelf space for its brands. Lacking sophisticated
point-of-sale systems, retailers could not dispute with P&G's analyses and resented its retail clout.